In the light of the judgment of Lords Justices Auld, May and Gage, who rejected the challenge by Nail to the High Court damages awarded by Mr Justice Eady, there is little doubt that, provided offers of amends are genuine and made promptly, they can result in hefty damages discounts.

In the case of Nail, Mr Justice Eady started with a damages figure of £45,000 and then, taking into account the prompt offer of amends by News Group, cut it by 50 per cent.

Nail’s claim related to a News of the World piece and allegations in a biography published in 1998.

News Group and HarperCollins, after being sued, both made offers of amends and the case went to court for the judge to assess damages.

In addition to the £22,500 award against News Group, he awarded a further £7,500 against HarperCollins.

Nail’s lawyers had argued in the Court of Appeal that the awards were too low, and that the judge had been wrong to “reward” News Group for making the amends offer.

They claimed there were no provisions in the 1996 Act for damages awarded in defamation proceedings to be discounted if the defendant made an offer of amends, and that such an approach would result in irresponsible journalism.

But Lord Justice May said: “I accept that the court must be careful not to drive down damages in libel cases to a level which publishers might with equanimity be tempted to risk having to pay.

The obvious corollary is that the level of damages should not be so disproportionately high that freedom of expression is unduly curtailed.

“But, in cases in which an offer to make amends has been made and accepted, questions of deterrence may not be of any great significance.”

He continued : “If an early unqualified offer to make amends is made and accepted and an agreed apology is published there is bound to be substantial mitigation.”

In such circumstances a claimant knew that his reputation had been repaired to the full extent that was possible.

He had been vindicated and relieved from the anxiety and costs risk of contested proceedings.

Of the damages award of £22,500, Lord Justice May said: “The judge gave proper and full consideration to all relevant factors and reached a balanced conclusion.”

He added: “Each case will be different and require individual consideration.

But most such cases will, as I have said, exhibit substantial mitigation.

“This was, in my view such a case.”

The 50-year-old actor now faces a costs bill estimated at £200,000.

THE NAIL FILE

Jimmy Nail had sued the News of the World’s publishers over an article in 2002 making false allegations about his sexual behaviour.

He also sued the author and publishers of a biography, Nailed, that appeared four years earlier and on which the article was based.

The News of the World apologised for libelling Nail and, using procedures introduced in 1996, News Group Newspapers and HarperCollins made an “offer of amends” – an offer to apologise and pay damages. Nail rejected there offer of £37,500 to settle his claim.

Subsequently a figure of £30,000 was fixed by the High Court in March because the parties could not agree.

Mr Justice Eady said the “very adoption of the procedure has a major deflationary effect upon the appropriate level of compensation”.

That was because the defendant had “put his hands up” to the libel while the claimant no longer had the “stress of litigation” hanging over him.

Nail’s QC, Hugh Tomlinson, told the Court of Appeal that if news organisations could settle claims relatively cheaply, the new procedure would lead to irresponsible journalism, eroding the degree of caution newspapers showed towards information about which they were in doubt.